What businesses need to know about the Finance Bill 2026-27

The government has released a significant package of draft legislation, consultations and policy papers as part of the Finance Bill 2026-27 process. The measures will have implications for businesses operating internationally, property developers, investors and groups within the scope of the UK’s corporate tax regime.

The package includes new consultations as well as draft legislation for inclusion in the Finance Bill. Over the coming weeks, we will be taking a closer look at the detail and sharing more in-depth commentary on the proposals.

Below is a brief overview of some of the key consultations and draft legislation.

How could the proposed changes to predevelopment costs affect infrastructure projects?

This consultation concerns the tax treatment of predevelopment expenditure, particularly for large infrastructure projects. The review follows the well-publicised Supreme Court’s decision in the Orsted litigation, discussed in our previous article, and forms part of the government’s commitment, set out in its Corporate Tax Roadmap, to provide greater certainty around capital allowances and investment incentives.

The consultation seeks evidence on the types of predevelopment costs incurred by businesses, how those costs are currently treated for tax purposes and whether the existing rules create uncertainty or influence investment decisions. Examples include surveys, design work and other expenditure incurred before a project reaches the construction phase.

This will be particularly relevant for businesses involved in infrastructure, renewable energy and large-scale development projects, where significant expenditure can be incurred long before assets are constructed and brought into use.

What could change for withholding tax on overseas interest payments?

There have been longstanding concerns and difficulties around the government’s position on withholding tax applied to UK-source interest. A concessionary treatment applied by HMRC has been on pause for a long period of time, and this consultation appears to be aimed at resolving the issues that arise.

The government is seeking views on potential reforms that could simplify the process while continuing to protect the UK tax base from profit-shifting risks. At this stage no preferred solution has been identified, and stakeholders are being invited to comment on a range of possible approaches.

Given the widespread use of cross-border financing arrangements, this consultation is likely to attract significant interest from multinational groups, private equity-backed businesses and overseas lenders. Any simplification could represent a welcome reduction in administrative friction and give greater certainty to businesses going forwards.

What do the latest Pillar Two changes mean for multinational groups?

Draft legislation has been published to implement the OECD’s “Side-by-Side” package into the UK’s Pillar Two regime. The changes affect multinational groups with annual global revenues exceeding €750 million and are intended to ensure that UK legislation remains aligned with the latest OECD administrative guidance.

To understand how the Pillar Two regime works and what it means for affected groups, see our guide, Pillar 2: What You Need to Know.

The package introduces new safe harbours and simplification measures, including the Side-by-Side safe harbour, an Ultimate Parent Entity safe harbour, a Substance-Based Tax Incentive safe harbour and a Simplified Effective Tax Rate safe harbour. Additional technical amendments are also proposed to address practical issues identified since the UK regime was first enacted.

For large multinational groups, the focus will be on understanding whether the new safe harbours can reduce compliance burdens and how the latest OECD guidance impacts existing Pillar Two calculations and reporting processes.

What is changing for foreign permanent establishments?

The government first announced it was reviewing the corporation tax treatment of foreign permanent establishments (PE) in May 2026. It is seeking to move from the current elective regime to a mandatory exemption for foreign PE profits and losses from accounting periods beginning on or after 1 January 2027.

Alongside the mandatory exemption, the existing loss clawback mechanism will be replaced with a transitional regime designed to prevent foreign PE losses and related amounts from being carried into the new exempt environment. The legislation also contains targeted anti-avoidance provisions to prevent businesses from restructuring arrangements in anticipation of the changes.

Businesses with overseas operations should review the proposals carefully, particularly where historic foreign branch losses have been utilised in the UK. The interaction between existing structures and the proposed transitional rules could be an important area for future planning.

How could Land Remediation Relief (LRR) change for developers and investors?

 The government has opened a second consultation on Land Remediation Relief, the enhanced corporation tax relief designed to encourage the redevelopment of contaminated and derelict brownfield land. Following an earlier review, the latest consultation focuses on potential reforms to make the relief more accessible and better aligned with property development practices.

Among the areas under consideration are the timing of claims, the scope of qualifying contamination costs and the treatment of long-term derelict land. The government is seeking evidence on whether elements of the current regime prevent the relief from being as effective as intended.

With housing delivery and brownfield regeneration remaining key policy objectives, any changes to LRR will be of particular interest to developers, property investors and construction businesses

How is the Enterprise Management Incentive process being simplified?

A smaller change being implemented by the government is following on from its announcement at Budget 2025, that it would remove the requirement for companies to submit a notification of a grant of Enterprise Management Incentive (EMI) options.

Draft legislation has been issued to achieve this. The intention is to provide an administrative simplification to the EMI regime. It allows companies to report new grants of options on the annual EMI end of year return instead of requiring a separate notification, and will apply for grants from 6 April 2027 onwards.

What do the new rules mean for natural resource exploration rights?

The government is proposing legislation to clarify the treatment of profits arising from exploration and exploitation rights relating to UK natural resources and activities on the UK continental shelf. The measure will explicitly treat such rights as immovable property for tax treaty purposes.

The change is intended to ensure that UK tax treaties operate consistently and as intended, particularly in relation to arrangements such as overriding royalty interests, net profit interests and similar rights connected with natural resource activities. The government believes this will provide greater clarity and alignment with international practice.

Although expected to affect a relatively small population of taxpayers, the change will be important for businesses operating in the energy, mining and natural resources sectors and for investors holding interests linked to these activities.

What is happening to stamp taxes on shares?

Finally, one of the more significant structural reforms included within the package is the proposed replacement of Stamp Duty and Stamp Duty Reserve Tax (SDRT) with a new Securities Transfer Tax (STT). The government has described the measure as a major modernisation of the UK’s stamp taxes on shares regime, bringing together two longstanding and interdependent taxes into a single, fully digital, self-assessed system.

The reform follows several years of consultation with industry and aims to simplify compliance, improve certainty for taxpayers and support wider capital markets modernisation. Under the new framework, transactions in securities that currently fall within either Stamp Duty or SDRT would instead be subject to a single tax, administered through a digital reporting and payment process.

While many of the existing reliefs are expected to be retained, the draft legislation represents the most substantial reform of the UK’s securities transfer taxes for decades. The reform is planned to be introduced in 2027, and so transactions, reorganisations and reconstructions around this time will need careful thought.

What should businesses do next?

The Finance Bill 2026-27 package contains a mixture of technical amendments, targeted anti-avoidance measures and consultations. While some proposals will affect only specific sectors or large multinational groups, others have the potential to influence a much broader range of businesses and investors.

We are reviewing the draft legislation and consultation documents, and will be publishing more detailed insights on each of these measures over the coming weeks. We will also be inputting into the consultations where relevant, providing our experience to assist the government with upcoming decisions.